upp reit holdings limited · under the university partnerships programme. upp holdings limited is...

UPP REIT Holdings Limited Condensed consolidated interim financial statements for the six months ended 29 February 2020

Directors and Advisors–Strategic report–Condensed consolidated statement of profit or loss–Condensed consolidated statement of other comprehensive income–Condensed consolidated statement of changes in equity–Condensed consolidated statement of financial position–Condensed consolidated statement of cash flows–Notes to the condensed consolidated interim financial statements

03–

04–

08–

09–

10–11–

13–

15

FINANCIAL STATEMENTS

02

Contents

Directors

–Secretary

–Registered

office

Richard Bienfait – resigned on 31 January 2020

Irina FrolovaHenry Gervaise-JonesElaine Hewitt – appointed on 7 April 2020

Jingshen HuHendrik HuizingRobert McClatcheyAndrew Wilkie –Sanne Secretaries Limited–IFC 5 St. Helier Jersey JE1 1ST

03

Directors and Advisors

Principal activity and business review

UPP REIT Holdings Limited

(‘the Company’) (ISIN – JE00BF5PSP50)

is a close-ended UK REIT and the Parent

of the UPP REIT Holdings Group (‘the Group’).

The Company was incorporated on 18 April 2017

and admitted to the Official List of The

International Stock Exchange (TISE)

on 28 February 2018. As a result of the

Group restructuring in February 2018, the

Company became a parent company of UPP

Group Holdings Limited, trading as University

Partnerships Programme (‘UPP’).

The Company’s principal activities are those

of an investment holding company and the

provision of treasury management facilities.

The principal activity of its subsidiary

undertakings is the development, funding,

construction and operation, including

facilities management, of residential student

and academic accommodation under the

University Partnerships Programme.

For the six months ended 29 February 2020,

the Group’s operating profit saw an increase

of 22.1% to £30.9 million. The period also saw

the Group reach financial close on a further

scheme with Swansea University, open new

accommodation at the University of Hull and

University of London and continue construction

activities on schemes at the University of Exeter.

On 2 December 2019, the Group announced

that it had successfully reached financial close

on a £43.4 million scheme with St Modwen

Developments, Swansea University and Swan

Global LLP for the acquisition of the freehold

of 411 rooms at the University’s Bay Campus.

The acquisition included £38.7 million

of index-linked debt financing, with a debt

tenor of circa 45 years. UPP Group Holdings

Limited and its Shareholders invested

£4.7 million of subordinated debt and equity.

It marked the second successful deal

between UPP, St Modwen Developments

and Swansea University, and follows the

£98.1 million transaction in February 2018

where UPP acquired two companies from

St Modwen Properties PLC to operate 2,021

study bedrooms on the University’s Bay

Campus, as well as acquiring a freehold

property interest in further accommodation.

The total number of rooms operated by UPP

on the Bay Campus now stands at 2,432.

During the same month, on 11 December

2019, the Group announced that it had been

appointed to deliver a three-year, full facilities

management service by Imperial College

London in what became UPP’s first private-let

contract with a university. The Group’s facilities

management arm, UPP Residential Services

Limited, is operating 192 one, two and

three-bedroom apartments on the University’s

White City Campus in Hammersmith and Fulham.

The Directors present their report and financial statements for the six months ended 29 February 2020.

Strategic report

04

Strategic report

In terms of construction activity, during

September 2019, two new developments at the

University of Hull and the University of London

respectively welcomed their first student

residents for the academic year 2019/20, with

practical completion having been reached

during the year ended 31 August 2019.

In September, the University of Hull and UPP

opened their doors to new and returning

students at the Westfield Court residences.

UPP is responsible for operating the nine-block

development, totalling 1,462 rooms, with an

investment value of over £155 million.

Established in 2016, the partnership involved

UPP designing, building and financing the

scheme, operating it for 51 years thereafter.

Successful completion of Westfield Court,

which has a total construction value of over

£97 million, means UPP now operates a total

of 1,750 rooms across the University’s campus,

including 288 rooms at the existing Taylor

Court residences.

In partnership with the University of London,

the Group also delivered a further 511 rooms

at the Eleanor Rosa House development

in Stratford, East London. It provides

a mixed-use, 33-storey landmark building

delivering over 18,000 square metres of new

student accommodation. UPP operates all study

bedrooms and associated communal space.

Eleanor Rosa House is the result of UPP’s

second transaction with the University

of London, reinforcing the bespoke, long-term

partnership which is enhancing and increasing

the accommodation available to students at the

University and its affiliated institutions. It was

officially opened by Her Royal Highness, The

Princess Royal, Chancellor of the University

of London, on 28 January 2020.

During the six months ended 29 February 2020,

the Group continued to progress construction

activities relating to three schemes with the

University of Exeter. Having successfully

reached financial close on the £139.7 million East

Park project in January 2019, UPP appointed

Vinci Construction UK Limited to deliver the

development on the University’s Streatham

Campus which is now well underway.

The scheme is set to become operational

over two phases - in September 2020 and

September 2021.

East Park marked the third on-campus

scheme currently under construction between

UPP and the University of Exeter, with the

£41.4 million redevelopment of its Moberly and

Spreytonway residences – consisting of 250

and 131 beds respectively – due for occupation

by September 2020. When the three schemes

are complete, UPP will be operating 4,156 rooms

on the University’s campus.

At the beginning of the six months ended

29 February 2020, following a fire at student

accommodation in Greater Manchester, the

fire safety of student accommodation once

again became a focus of Government and

media attention.

Following the Grenfell Tower tragedy in June

2017, UPP established a Fire Safety Working

Group focused on three key workstreams - fire

safety compliance, construction and cladding,

and communicating with stakeholders.

All buildings across the portfolio have been

fully reviewed, with the findings presented

to university partners. We can confirm that all

of our buildings comply with UPP’s Fire Policy

and Procedures and that independent Fire Risk

Assessments have been undertaken.

05

Strategic report

06

Strategic report

On 17 January 2020, UPP announced the

appointment of Elaine Hewitt as its new Chief

Executive Officer. Elaine joined the Business

on 1 April 2020.

A Fellow of the Royal Institute of Chartered

Surveyors (RICS), Elaine joins UPP from NHS

Property Services Ltd where she has been Chief

Executive Officer since 2015. Prior to this, Elaine

held the position of Group Property Director

at BT Group PLC.

As well as having considerable private sector

experience, Elaine has also held public sector

roles, notably Crown Representative in the

Cabinet Office for Property and Facilities

Management across Government.

Finally, the COVID-19 outbreak in the UK and

the rest of the world has entailed significant

disruption for higher education (HE) and many

other sectors. The overarching priority for

the Group is to work closely and effectively,

together with our partners, to ensure our

accommodation remains available to students

and operating safely and effectively. Our plans

and activities in support of students, staff and

our partners have been aligned to advice from

Public Health England. More details of our

approach and related activities may be found

on our Investor Centre.

With respect to revenue, the Group receives

rent from each institution, rather than directly

from students. All rents due since the start

of the COVID-19 outbreak have been received.

The Group is not expecting an impact

on revenues for the 2019/20 year.

The Group is working to support

partners where we can and is engaging

in discussions regarding planning for the

academic term 2020/21. The UK Government

appears committed to facilitating as normal

a start to the 2020/21 academic year

as possible. Several HE institutions have

indicated that campuses will be open

in September albeit with social distancing

measure in place and with a blend of online

and face-to-face teaching.

The Group is developing operational

plans to facilitate the arrival and occupation

of our accommodation by students and does

not expect this to have a material impact

on revenues for the 2020/21 academic year.

07

Strategic report

Six months ended

29 February 2020

Six months ended

28 February 2019

Note £’000 £’000

Rental and other income 6 123,781 123,853

Cost of sales (58,668) (62,712)

Gross profit 65,113 61,141

Operating expenses (34,160) (35,783)

Operating profit 30,953 25,358

Finance income 7 8,452 2,687

Senior financing interest 8 (38,952) (37,311)

Other interest payable and similar charges 8 (1,558) (2,127)

Finance cost total (40,510) (39,438)

Loss on ordinary activities before taxation (1,105) (11,393)

Tax on loss on ordinary activities – –

Loss for the financial period (1,105) (11,393)

Loss for the financial year attributable to:

Non-controlling interests (886) (228)

Owners of the Parent (219) (11,165)


The above results all relate to continuing operations.

The notes on pages 15 to 37 form part of these financial statements.

Condensed consolidated statement of profit or lossFor the six months ended 29 February 2020

08

Condensed consolidated statement of profit or loss

Condensed consolidated statement of other comprehensive income

Six months ended

29 February 2020

Six months ended

28 February 2019

£’000 £’000


Items that will not be reclassified to profit and loss

Reversal of deferred tax on revaluation of principal assets - -

- -

Items that are or may be reclassified subsequently

to profit and loss

Fair value movements on swaps 37,382 (4,162)

37,382 (4,162)

Total other comprehensive income for the period 37,382 (4,162)

Total comprehensive loss for the period 36,277 (15,555)

Other comprehensive income for the year attributable to:

Non-controlling interests 573 (19)

Owners of the Parent 36,809 (4,143)

Total 37,382 (4,162)

Total other comprehensive income for the period attributable to:

Non-controlling interests (313) (246)

Owners of the Parent 36,590 (15,309)

Total 36,277 (15,555)


For the six months ended 29 February 2020

09

Condensed consolidated statement of other comprehensive income

Condensed consolidated statement of changes in equity

Attributable to equity holders of the Parent Company

Cash flow

Share

capital

Share

premium

Capital

reserve

Other

reserve

Cash flow

hedge reserve

Revaluation

reserve

Retained

earnings

Shareholders’

equity

Non-controlling

interestTotal equity

£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000

At 1 September 2018 1,000 458,767 23,285 - (105,987) 19,167 (244,421) 151,811 (12,377) 139,434

Loss for the financial period - - - - - - (11,165) (11,165) (228) (11,393)

Other comprehensive income - - - - (4,143) - - (4,143) (19) (4,162)

Total comprehensive income - - - - (4,143) - (11,165) (15,308) (247) (15,555)

New shares issued 32 14,718 - - - - - 14,750 - 14,750

Equity-settled share-based payments - - - - - - 38 38 - 38

Transactions with owners

Dividends paid - - - - - - (8,000) (8,000) - (8,000)

At 28 February 2019 1,032 473,485 23,285 - (110,130) 19,167 (263,548) 143,291 (12,624) 130,667

At 1 September 2019 1,032 473,485 23,428 - (162,574) 19,167 (270,609) 83,929 (14,001) 69,928

Loss for the financial period - - - - - - (219) (219) (886) (1,105)

Other comprehensive income - - - - 37,382 - - 37,382 - 37,382

Total comprehensive income - - - - 37,382 - (219) 37,163 (886) 36,277

New shares issued - - - - - - - - - -

Equity-settled share-based payments - - - - - - (143) (143) - (143)

At 29 February 2020 1,032 473,485 23,428 - (125,192) 19,167 (270,971) 120,949 (14,887) 106,062



Condensed consolidated statement of changes in equity

10

Condensed consolidated statement of financial position

29 February

2020

31 August

2019

Note £’000 £’000

Assets

Non-current assets

Property, plant and equipment 568 1,533

Service concession arrangements – intangible assets 10 1,610,197 1,586,509

Other intangible assets 110,445 110,244

Derivative financial assets 52,842 22,297

Total non-current assets 1,774,052 1,720,583

Current assets

Trade and other receivables 11 6,611 7,897

Service concession arrangements – financial assets 135,998 102,984

Cash at bank and in hand 21 199,554 231,351

Total current assets 342,163 342,232

Total assets 2,116,215 2,062,815

Equity and liabilities

Liabilities

Non-current liabilities

Borrowings 14 1,735,187 1,711,968

Derivative financial instruments 14 169,488 180,785

Employee benefit obligations 1,882 1,882

Total non-current liabilities 1,906,557 1,894,635

As at 29 February 2020

11

Condensed consolidated statement of f inancial position

Condensed consolidated statement of financial position (continued)

29 February 2020 31 August 2019

Note £’000 £'000

Current liabilities

Borrowings 14 36,817 34,817

Trade and other payables 12 20,385 16,939

Accrual and deferred income 46,251 46,353

Provisions 143 143

Total current liabilities 103,596 98,252

Total liabilities 2,010,153 1,992,887

Equity

Called-up share capital 1,032 1,032

Share premium account 473,485 473,485

Capital reserves 23,428 23,428

Cash flow hedge reserve (125,192) (162,574)

Revaluation reserve 19,167 19,167

Retained earnings (270,971) (270,609)

Equity attributable to owners of the Parent Company 120,949 83,929

Non-controlling interest (14,887) (14,001)

Total equity 106,062 69,928


The financial statements were approved and authorised for issue by the Board on 23 June 2020 and were signed

on its behalf by:

Henry Gervaise-Jones Director

12

Condensed consolidated statement of f inancial position

Condensed consolidated statement of cash flowsFor the six months ended 29 February 2020

Six months ended

29 February 2020

Six months ended

28 February 2019

£’000 £'000


Adjustments for:

Tax on loss on ordinary activities - -

Net interest expense 32,058 36,751

Operating profit 30,953 25,358

Depreciation 17,409 22,611

Goodwill impairment 998 998

Amortisation of computer software 374 500

Increase/(decrease) in provisions for dilapidations - 8

Increase/(decrease) in debtors due within one year (2,910) 4,743

Increase/(decrease) in creditors due within one year 539 9,414

Net cash inflow from operating activities 47,363 63,632

Investing activities

Interest received 3,993 964

Payments for intangible fixed assets (589) (365)

Payments for concession arrangements (74,272) (75,754)

Acquisition of subsidiary, net of cash acquired - -

Payments to acquire tangible fixed assets (89) (139)

Net cash flow used in investing activities (70,957) (75,294)

13

Condensed consolidated statement of cash flows

Condensed consolidated statement of cash flows (continued)

Six months ended

29 February 2020

Six months ended

28 February 2019

£’000 £'000

Financing activities

New debt drawn 39,291 65,372

Interest paid (24,945) (30,856)

Senior debt repayments (21,164) (10,611)

Dividends paid - (8,000)

Finance lease payments (1,385) (2,380)

Capital contributions - 14,750

Net cash flow from/(used in) financing activities (8,203) 28,275

Increase/(decrease) in cash and cash equivalents (31,797) 16,613

Cash and cash equivalents at 1 September 231,351 207,781

Cash and cash equivalents at 29 February 199,554 224,394


The financial statements were approved and authorised for issue by the Board on 23 June 2020 and were signed

on its behalf by:

Henry Gervaise-Jones Director

14

Condensed consolidated statement of cash flows

1. General information

UPP REIT Holdings Limited (‘the Company’)

is a close-ended UK REIT and the Parent

of the UPP REIT Holdings Group (‘the Group’).

UPP REIT Holdings Limited is a private

company limited by shares and incorporated

on 18 April 2017 in Jersey, with company

number 123688. The registered office is IFC

5, St. Helier, Jersey, JE1 1ST. These condensed

consolidated interim financial statements

(‘interim financial statements’) for the six

months ended 29 February 2020 comprise

the Company and its subsidiaries (together

referred to as ‘the Group’).

The Company’s principal activities are

those of an investment holding company

and the provision of treasury management

facilities. The principal activity of its subsidiary

undertakings is the development, funding,

construction and operation - including facilities

management - of student accommodation

under the University Partnerships Programme.

UPP REIT Holdings Limited is listed

on The International Stock Exchange (TISE).

UPP REIT Holdings Limited is UK tax resident.

2. Basis of preparation

These interim financial statements of the

Group have been prepared in accordance

with IAS 34 ‘Interim Financial Reporting’ and

should be read in conjunction with the Group’s

last annual consolidated financial statements

as at and for the year ended 31 August 2019

(‘last annual financial statements’). They

do not include all of the information required

for a complete set of IFRS financial statements.

However, selected explanatory notes are

included to explain events and transactions

that are significant with regard to any

changes in the Group’s financial position

and performance since the last annual

financial statements.

The accounting policies and methods

of computation applied in these interim

financial statements are the same as those

applied in the Group’s consolidated financial

statements as at and for the year ended

31 August 2019.

These interim financial statements for the

six months ended 29 February 2020 were

authorised for issue by the Company’s

Board of Directors on 23 June 2020.


Notes to the condensed consolidated interim financial statements

15


3. Impact of new accounting standards and changes in accounting policies

IFRS 16

The International Accounting Standards

Board issued a new lease standard, IFRS 16,

to replace the existing lease standard (IAS

17) from 1 January 2019, with early adoption

possible before that date for entities that have

also early-adopted IFRS 15 - the new revenue

standard which comes into effect from

1 January 2019.

A key change arising from IFRS 16 is that

lessees are required to recognise a lease

liability reflecting future lease payments and

a right-of-use asset for lease contracts, subject

to exceptions for short-term leases and leases

of low-value assets.

There is no significant impact of the above

changes on consolidated financial statements

of the Group.

4. Judgements and key sources of estimation uncertainty

The preparation of interim financial

statements requires management to exercise

judgement in applying the Group’s accounting

policies. It also requires the use of estimates

and assumptions that affect the reported

amounts of assets and liabilities, income and

expenses. However, the nature of estimation

means that actual outcomes could differ

from those estimates.

The significant judgements and estimates

made by management in applying the

Group’s accounting policies and the key

sources of estimation uncertainty were the

same as those described in the last annual

financial statements.

The areas involving the most sensitive

estimates and assumptions that are significant

to the financial statements are set out below:

Valuation of retail price index (RPI)

and interest rate (IR) swaps

Derivatives are initially recognised at fair

value at the date a derivative is entered into

and are subsequently remeasured to their fair

value at each reporting date. The fair value

of the derivatives has been determined

on a ‘transfer-value basis’, which takes into

consideration the price the hedging instrument

could be replaced with another one with the

same remaining terms. To that end, a calibration

of usual valuation models has been performed

on the trade date for each derivative

to determine an initial spread to be added

onto market conditions and applied at each

year end. Those market interest and inflation

curves for a replacement have been used,

deriving future cash flows based on forward

rates and discounting them to produce

their reported value. The Group has used

a third-party expert to assist with valuing

such instruments.

Impairment of non-financial assets

At each reporting date, the Group

assesses whether an asset may be impaired.

If any such indication exists, the Group

estimates the recoverable amount of the asset.

If it is not possible to estimate the recoverable

amount of the individual asset, the Group

estimates the recoverable amount of the

cost generating unit (CGU) to which the asset

belongs. The recoverable amount of an asset

or CGU is the higher of its fair value less costs

to sell and its value in use. If the recoverable

amount is less than its carrying amount, the

carrying amount of the asset is impaired and

it is reduced to its recoverable amount through

impairment in profit and loss unless the

asset is carried at a revalued amount where

the impairment loss of a revalued asset

is a revaluation decrease.

16


Judgements and key sources of estimation uncertainty (continued)

An impairment loss recognised for all

assets is reversed in a subsequent period

only if the reasons for the impairment

loss have ceased to apply.

Capitalisation of costs

and construction margin

During the period of construction, all

costs incurred as a direct result of financing,

designing and constructing the student

accommodation, including finance costs,

have been capitalised.

Revenue on construction is recognised at cost

with no margin as profitability is considered

negligible with no interim services provided

during construction and the risk fully passing

down to the building contractor.

Hedge accounting for inflation swaps

The Group has chosen to apply hedge

accounting for all hedging instruments.

Significant judgement is exercised in concluding

that future inflationary increases or decreases

in rent receivable from university partners are

separately identifiable and reliably measurable

components of the rental income. This ensures

the inflation component of rental income

and the related RPI swaps are in a hedging

relationship which meets the qualifying

criteria for hedge accounting under IFRS.

Taxation

The Group is a Real Estate Investment Trust

(REIT). As a result, the Group does not pay

UK corporation tax on its profits and gains

from the qualifying rental business in the UK.

Non-qualifying profits and gains of the Group

continue to be subject to corporation tax

as normal. In order to maintain Group REIT

status, certain ongoing criteria must be met.

The main criteria are as follows:

• At the start of each accounting period,

the assets of the tax-exempt business

must be at least 75% of the total value

of the Group’s assets;

• At least 75% of the Group’s total

profits must arise from the tax-exempt

business; and

• At least 90% of the notional taxable

profit of the property rental business

must be distributed.

The Directors confirm that these criteria will

be met for the qualifying accounting period

and intend that the Group should continue

as a REIT for the foreseeable future.

Deferred tax assets and liabilities require

management judgement in determining the

amounts, if any, to be recognised. In particular,

judgement is required when assessing the

extent to which deferred tax assets should

be recognised, taking into account the

expected timing and level of future taxable

income. Deferred tax assets are only

recognised when management believes they

will be recovered against future taxable profits.

17


5. Segment information

The Group is organised into business

units based on their services and has

three reportable segments as follows:

• Special Purpose Vehicles (SPVs) -

performing development, funding,

construction and operation of student

accommodation under the University

Partnerships Programme

• UPP Residential Services Limited

(URSL) - providing facilities management

services to SPVs

• UPP Projects Limited (UPL) - securing

long-term, bespoke partnership

agreements to design, build and finance

student accommodation and related

academic infrastructure

The Group’s management monitors the

operating results of its segments separately

for the purpose of making decisions on resource

allocation and performance assessment.

Segment performance is evaluated based

on profit or loss and is measured consistently

with profit or loss in the condensed

consolidated interim financial statements.

Transfer prices between operating segments

are set on an arm’s length basis.

All segments operate and perform

all transactions in the UK.

Other operations include financing and

general Group management, which are not

considered by management as a separate

reporting segment.

18


Segment information (continued)

Six months ended 29 February 2020

Note SPVs URSL UPL Total segments

Adjustments and

eliminations Consolidated

£’000 £’000 £’000 £’000 £’000 £’000

Rental and other income – external 121,253 2,528 - 123,781 - 123,781

Rental and other income – internal A - 11,274 1,877 13,151 (13,151) -

Cost of sales B (56,381) (11,673) (256) (68,310) 9,642 (58,668)

Gross profit 64,872 2,129 1,621 68,622 (3,509) 65,113

Operating expenses B (15,101) (1,166) (999) (17,266) (16,894) (34,160)

Operating profit 49,771 963 622 51,356 (20,403) 30,953

Finance income 8,364 3 - 8,367 85 8,452

Senior financing interest (38,583) - - (38,583) (369) (38,952)

Other interest payable and similar charges C (13,865) - - (13,865) 12,307 (1,558)

Finance cost total (52,448) - - (52,448) 11,938 (40,510)

Segment profit/(loss) on ordinary activities before taxation 5,687 966 622 7,275 (8,380) (1,105)

Tax on loss on ordinary activities - - - - - -

Segment profit/loss for the financial year 5,687 966 622 7,275 (8,380) (1,105)

Total assets D 2,056,730 29,879 2,341 2,088,950 27,265 2,116,215

Total liabilities D 2,258,594 10,000 10,474 2,279,068 (268,915) 2,010,153

19




Note SPVs URSL UPL Total segments

Adjustments and


£’000 £’000 £’000 £’000 £’000 £’000

Rental and other income – external 118,656 1,641 3,556 123,853 - 123,853

Rental and other income – internal A - 10,122 4,681 14,803 (14,803) -

Cost of sales B (60,228) (8,281) (4,462) (72,971) 10,259 (62,712)

Gross profit 58,428 3,482 3,775 65,685 (4,544) 61,141

Operating expenses B (9,014) (794) (1,096) (10,904) (24,879) (35,783)

Operating profit 49,414 2,688 2,679 54,781 (29,423) 25,358

Finance income 2,644 - - 2,644 43 2,687

Senior financing interest (37,689) - - (37,689) 378 (37,311)

Other interest payable and similar charges C (11,027) - - (11,027) 8,900 (2,127)

Finance cost total (48,716) - - (48,716) 9,278 (39,438)

Loss on ordinary activities before taxation 3,342 2,688 2,679 8,709 (20,102) (11,393)

Tax on loss on ordinary activities - - - - - -

Loss for the financial year 3,342 2,688 2,679 8,709 (20,102) (11,393)

As at 31 August 2019

Total assets D 1,988,385 35,266 1,110 2,024,761 38,054 2,062,815

Total liabilities D 2,224,261 16,353 8,858 2,249,472 (256,585) 1,992,887

20



Notes to the segment information:

A. Rental and other income

Adjustments and eliminations represent intercompany

transactions that are eliminated on consolidation.

Those transactions are mainly held between URSL

and each SPV. There is also an elimination of UPL

income that represents internal revenue from any

new development projects. This income is eliminated

against the SPV’s assets.

B. Cost of sales and operating expenses

Adjustments and eliminations represent intercompany

transactions that are eliminated on consolidation.

Those transactions are mainly transactions held

between URSL and each SPV. The adjustments and

eliminations line also represents administrative costs

that are not allocated to any of the segments.

C. Other interest payable and similar charges

Adjustments and eliminations mainly represent

financing costs payable to Shareholders that are

not allocated to any of the segments.

D. Total assets and total liabilities

Adjustments and eliminations related to total

assets mainly represent assets related to the Group

management companies (such as UPP Group Limited)

and represent goodwill and cash allocated to those

companies. Adjustments and eliminations related

to total liabilities represent mainly UPP Bond I Issuer

PLC liabilities and accruals and trade creditors

related to Group management activities.

6. Turnover

The Group’s operations and main revenue streams are those described in the last annual financial statements.

Turnover represents the amounts derived from the provision of services, which fall within the Group’s ordinary

activities, stated net of value added tax (VAT).

Group turnover arises wholly in the UK and is split as below:

Six months ended

29 February 2020

Six months ended

28 February 2019

£’000 £’000

Student accommodation rental income 91,166 84,534

Construction services 30,087 33,096

Management and development services - 3,555

Facilities management services 2,528 2,668

123,781 123,853

In the following table, revenue from contracts with customers is disaggregated by service lines. The table also

includes a reconciliation of the disaggregated revenue with the Group’s reportable segments (see Note 5).

21


Turnover (continued)


SPVs URSL UPL Total segments

Adjustments and


Note £’000 £’000 £’000 £’000 £’000 £’000

Student accommodation rental income 91,166 - - 91,166 - 91,166

Construction services 30,087 - - 30,087 - 30,087

Management and development services - intragroup - - 1,877 1,877 (1,877) -

Facilities management services - 2,528 - 2,528 - 2,528

Facilities management services - intragroup - 11,274 - 11,274 (11,274) -

Total 121,253 13,802 1,877 136,932 (13,151) 123,781

Revenue as reported in Segments 5 121,253 13,802 1,877 136,932 (13,151) 123,781


Student accommodation rental income 85,560 - - 85,560 - 85,560

Construction services 33,096 - - 33,096 - 33,096

Management and development services - - 3,556 3,556 - 3,556

Management and development services - intragroup - - 4,681 4,681 (4,681) -

Facilities management services - 1,641 - 1,641 - 1,641

Facilities management services - intragroup - 10,122 - 10,122 (10,122) -

Total 118,656 11,763 8,237 138,656 (14,803) 123,853

Revenue as reported in Segments 5 118,656 11,763 8,237 138,656 (14,803) 123,853

23


Turnover (continued)

The following table provides information about receivables, contract assets and contract liabilities from contracts

with customers.


Receivables, which are included in ‘trade and other receivables’ 3,234 4,196

Contract assets 3,250 2,531

Contract liabilities (24,460) (2,196)

The contract assets primarily relate to the Group’s rights to consideration for work completed but not billed at the

reporting date. The contract assets are transferred to receivables when the rights become unconditional. This usually

occurs when the Group issues an invoice to the customer.

The contract liabilities primarily relate to the advance consideration received from customers. This will be recognised

as revenue when the service is provided and is expected to be recognised as revenue in the next financial year.

The Group issues invoices for rental services to universities on regular basis as per an agreement with each university

(which varies from quarterly to three times per year). The invoices for rental services are raised upfront for the period

agreed with the universities. The payments are typically done within one month from the issuance of the invoice.

The Group issues invoices for facilities management services on a monthly basis after the services were performed.

The payments are typically received within one month from the issuance of the invoice.

During the construction phase, the service concession grantor gives the Group non-cash consideration in the form

of an intangible asset being a licence to charge users of the public service, in exchange for construction services.

Therefore, there are no revenue cash flows or invoicing activities in relation to construction services revenue.

7. Interest and similar income

Six months ended

29 February 2020

Six months ended

28 February 2019

£’000 £’000

Interest received on cash balances 264 235

Interest income on finance receivable 3,729 2,452

Finance gain on fair value movements on swaps 4,459 -

8,452 2,687

24


8. Interest and similar expense

Six months ended

29 February 2020

Six months ended

28 February 2019

£’000 £’000

Financial liabilities measured at amortised cost

Bank loan interest 12,008 12,694

Interest payable on senior secured notes 17,679 18,037

Interest payable on index-linked facilities 9,265 6,580

Subordinated loan note interest 1,558 1,459

Financial liabilities measured at fair value

Fair value movements on swaps - 668

40,509 39,438

9. Tax on loss on ordinary activities and factors that may affect future tax charges

With effect from 1 March 2018, UPP REIT Holdings Limited, the ultimate parent company of the Group, has elected for

Real Estate Investment Trust (‘REIT’) status to apply to the Group. As a result, the Group no longer pays income tax

on profits and gains from qualifying property rental business, providing it meets certain conditions.

25


10. Intangible assets – service concession arrangements

Service

concession

arrangements

Assets in the

course of

construction Total

£’000 £’000 £’000

Cost

At 1 September 2019 1,604,903 71,279 1,676,182

Additions 5,182 35,856 41,038

Transfer 71,279 (71,279) -

At 29 February 2020 1,681,364 35,856 1,717,220

Amortisation

At 1 September 2019 89,673 - 89,673

Charge during the year 17,350 - 17,350

At 29 February 2020 107,023 - 107,023

Net book value

At 29 February 2020 1,574,341 35,856 1,610,197

At 1 September 2019 1,515,230 71,279 1,586,509

Cost

At 1 September 2018 1,382,152 171,293 1,553,445

Additions - 71,929 71,929

At 28 February 2019 1,382,152 243,222 1,625,374

Amortisation

At 1 September 2018 60,674 - 60,674

Charge during the year 22,778 - 22,778

At 28 February 2019 83,452 - 83,452

Net book value

At 28 February 2018 1,298,700 243,222 1,541,922

At 1 September 2019 1,321,478 171,293 1,492,771

Included in intangible assets are properties being managed under service concession arrangements. Assets under

construction are scheduled to become operational in September 2020.construction are scheduled to become

operational in September 2020.26


11. Current trade and other receivables


£’000 £’000

Trade debtors 3,234 4,196

VAT recoverable 127 1,170

Prepayments and accrued income 3,250 2,531

6,611 7,897

12. Current trade and other payables


£’000 £’000

Trade creditors 14,414 15,664

Amounts owed to related parties 3,281 230

Other taxes and social security (113) 1,045

Accruals and deferred income 46,251 46,353

63,832 63,292

27


13. Financial assets


£’000 £’000

Derivatives designated as hedging instruments

RPI swaps 42,494 16,408

Derivatives not designated as hedging instruments

RPI swaps 10,348 5,889

Financial assets at amortised cost

Financial receivable - service concession arrangements 135,998 103,261

Trade and other receivables 3,234 4,252

Cash at bank and in hand 199,554 231,351

391,628 360,884

Total current 202,788 235,603

Total non-current 188,840 125,281

Derivatives designated as hedging instruments reflect the fair value of swap contracts designated as cash

flow hedges. Those hedges are used to hedge highly-probable revenue changes due to RPI or interest rate changes.

Derivatives not designated as hedging instruments reflect the fair value of those RPI swap contracts, which

are not designated in a hedge relationship, but are nevertheless intended to reduce the level of revenue changes

due to RPI changes.

The terms of the finance agreement provide that the lender will seek repayment of the finance only to the extent that

sufficient funds are generated by specific assets financed and will not seek recourse to the Company in any other form.

28


14. Financial liabilities


£’000 £’000

Borrowings

Senior secured notes 494,692 500,285

Senior debt 548,440 554,180

Senior index-linked debt 617,796 581,957

Non-recourse bank debt finance 80,032 80,801

Secured subordinated loan notes 31,044 29,562

Derivatives designated as hedging instruments

Interest rate swaps 169,488 176,165

RPI swaps - 4,620

Financial liabilities at amortised cost -

Trade and other payables 14,414 15,895

1,955,906 1,943,465

Total current 51,231 50,712

Total non-current 1,904,676 1,892,753

29


Financial liabilities (continued)

Non-recourse finance facilities

In December 2019, the Group reached financial close on a £43 million deal to acquire 411 bedrooms at Swansea

University. A new SPV, UPP (Swansea 2) LLP, has been set up and a new finance facility has been provided.

The key terms of the new facility are:

Coupon rate Final repayment date

Inflation-linked loan Real interest rate of 0.050% increasing

semi-annually by RPIAugust 2064

15. Hedging activities and derivatives

Derivatives not designated as hedging instruments

The Group uses RPI swaps to manage some of the inflation-related risk in relation to revenue. These contracts are not

designated as cash flow hedges and are entered into for the period consistent with the length of the service concession

arrangement contract.

Cash flow hedges

The Group uses RPI swaps and IR swaps to manage some of the inflation risk in relation to the Group’s revenue and

to manage interest rate risk in relation to the debt costs. The derivative contract lengths are aligned with the length

of the service concession arrangement contract in relation to the RPI swaps and with the length of the debt contracts

in relation to IR swaps.


£’000 £’000

Assets Liabilities Assets Liabilities

IR swaps designated as hedging instrument - (169,488) - (176,165)

RPI swaps designated as hedging instrument 42,494 - 16,408 (4,620)

RPI swaps not designated as hedging instruments 10,348 - 5,889 -

52,842 (169,488) 22,297 (180,785)

30


Hedging activities and derivatives (continued)

The Group chooses to adopt hedge accounting for all its derivative financial instruments which meet the qualifying

criteria for hedge accounting and reflect all movements in the fair value of these derivative financial instruments through

the cash flow hedge reserve as follows:

29 February

2020

31 August

2019

31 August

2018

£’000 £’000 £’000

Fair value of derivatives used for hedging

Creditors: amounts falling due after one year (169,488) (180,785) (133,122)

Debtors: amounts falling due after one year 42,494 16,408 26,248

Movement in fair value of derivatives used for hedging

Recognised profit/(loss) through other

comprehensive income:

Owners of the Parent 36,809 (56,587) (106,875)

Non-controlling interest 573 (915) 501

Fair value of derivatives not used for hedging

Creditors: amounts falling due after more

than one year- - -

Debtors: amounts falling due after one year 10,348 5,889 7,276

Movement in fair value of derivatives not used for hedging

Recognised profit through the income statement 4,459 (1,387) 498

31


16. Fair value measurement

The following table provides the fair-value measurement and hierarchy of the Group’s financial assets and liabilities:


£’000 £’000

Book value

Significant

observable

inputs Level 2 Book value

Significant

observable

inputs Level 2

Financial assets

Derivatives designated as hedging

instruments

RPI swaps 42,494 42,494 16,408 16,408

Derivatives not designated as hedging

instruments

RPI swaps 10,348 10,348 5,889 5,889

Financial assets at amortised cost

Financial receivable - service

concession arrangements135,998 135,998 102,984 102,984

Trade and other receivables 3,234 * 4,252 *

Cash at bank and in hand 199,554 * 231,351 *

391,628 360,884

Financial liabilities

Borrowings

Senior secured notes 494,692 522,111 500,285 527,646

Senior debt 548,440 548,898 554,180 551,698

Senior index-linked debt 617,796 579,510 581,957 528,563

Non-recourse bank debt finance 80,032 62,016 80,801 62,992

Secured subordinated loan

notes31,044 27,392 29,562 22,846

Derivatives designated as hedging

instruments

Interest rate swaps 169,488 169,488 176,165 176,165

RPI swaps - - 4,620 4,620

Financial liabilities at amortised cost

Trade and other payables 14,414 * 15,895 *

1,955,906 1,943,465

* The Group has not disclosed the fair values for financial instruments, such as short-term trade receivables and

payables, because their carrying amount is a reasonable approximation of fair value.

32


16. 1. Valuation techniques and significant unobservable inputs

Type Valuation technique

Derivative instruments

The fair values of the derivative IR swap contracts and RPI swap

contracts are estimated by discounting expected future cash

flows using market interest rates and market inflation rates

Financial receivables – service concession arrangements

Trade and other receivables

Cash at bank and in hand

Trade and other payables

The fair values of the Group’s cash and cash equivalents and

trade payables and receivables are not materially different from

those at which they are carried in the financial statements due

to the short-term nature of these instruments

BorrowingsThe valuation model considers the present value of expected

payment, discounted using a risk-adjusted discount rate

33


17. Reserves

Revaluation reserve

The reserve is used to record the surplus or deficit arising on valuation of the principal asset of the Group arising

on any chargeable gains if the associated property were to be sold at the balance sheet date.

Other reserve

Other reserve relates to deferred tax liability on fair-value adjustments arising on business combinations prior

to transition to IFRS on 1 September 2016.

Capital reserve

The capital contributions relate to benefits assigned by The Alma Mater Fund LP, which retains the risks associated

with the benefits. These have been received in cash and are non-refundable.

Cash flow hedge reserve

Cash flow hedge reserve records the fair-value movements on the derivative financial instruments and the deferred

tax associated with these.

Profit and loss account

The reserve consists of current and prior year profit and loss.

18. Parent undertaking and controlling party

The Group and the Company is 60% owned by PGGM Vermogensbeheer BV (‘PGGM’), on behalf of their pension

fund clients. This entity is incorporated in The Netherlands.

It is the Directors’ opinion that the ultimate controlling party is PGGM.

34


19. Related party transactions

As at 29 February 2020, the Directors consider that, during the year, Nottingham Trent University, the University

of Reading, the University of London and the University of Hull are the only related parties of the Group by virtue

of their shareholdings in the Company: UPP (Clifton) Holdings Limited, UPP (Byron House) Holdings Limited, UPP

(Reading 1) Holdings Limited, UPP (Cartwright Gardens) Holdings Limited, UPP (Duncan House) Holdings Limited

and UPP (Hull) Holdings Limited respectively.

During the six months ended 29 February 2020, the Group received an income of £7,775k (six months ended

28 February 2019: £7,132k) from Nottingham Trent University in respect of services provided by UPP (Clifton)

Holdings Limited and UPP (Byron House) Holdings Limited.

During the six months ended 29 February 2020, the Group received an income of £134k (six months ended

28 February 2019: nil) from University of Reading in respect of services provided by UPP (Reading I) Holdings

Limited and incurred costs of £1,756k (six months ended 28 February 2019: £1,639k) in respect of services provided

by the University of Reading and received income of £15,219k (six months ended 28 February 2019: £14,705k)

in respect of services provided to the University.

During the six months ended 29 February 2020, the Group incurred costs of £124k (six months ended 28 February 2019:

£67k) in respect of services provided by the University of London and received income of £8,051k (six months ended

28 February 2019: £5,099k) in respect of services provided by UPP (Cartwright Gardens) Holdings Limited and UPP

(Duncan House) Holdings Limited.

During the six months ended 29 February 2020, the Group received income of £5,465k (six months ended

28 February 2019: £2,100k) in respect of services provided to the University of Hull.

35


20. Investments

The Company owns 100% of the issued share capital in UPP Group Holdings Limited, which itself owns 100%

of the issued share capital of UPP Group Limited.

Details of subsidiaries in which UPP Group Limited holds 20% or more of the nominal value of any class of share

capital (or effective interest in), and which are included within the consolidated results of these financial statements,

are as follows:

The proportion of voting rights held is in line with the proportion of shares held.

Entity Proportion Shares held

Class

Nature of Business

UPP (Alcuin) Limited 100% Ordinary Student Accommodation

UPP (Lancaster) Holdings Limited 100% Ordinary Student Accommodation

UPP (Broadgate Park) Holdings Limited 100% Ordinary Student Accommodation

UPP (Nottingham) Limited 100% Ordinary Student Accommodation

UPP (Plymouth Three) Limited 100% Ordinary Student Accommodation

UPP (Kent Student Accommodation)

Limited

100% Ordinary Student Accommodation

UPP (Loughborough Student

Accommodation) Holdings Limited


UPP Leeds Student Residences Limited 100% Ordinary Student Accommodation

UPP Loring Hall Limited 100% Ordinary Student Accommodation

UPP (Oxford Brookes) Limited 100% Ordinary Student Accommodation

UPP (Reading I) Holdings Limited 80% Ordinary Student Accommodation

UPP (Kent Student Accommodation II)

Holdings Limited


UPP (Clifton) Holdings Limited 80% Ordinary Student Accommodation

UPP (Exeter) Limited 100% Ordinary Student Accommodation

UPP (Byron House) Holdings Limited 80% Ordinary Student Accommodation

UPP (Kent Turing) Holdings Limited 100% Ordinary Student Accommodation

UPP (Cartwright Gardens) Holdings

Limited


UPP (Duncan House) Holdings Limited 85% Ordinary Student Accommodation

UPP (Hull) Holdings Limited 90% Ordinary Student accommodation

UPP (Swansea) Holdings Limited 100% Ordinary Student accommodation

UPP (Exeter 2) Holdings 1 Limited 100% Ordinary Student accommodation

UPP (Exeter 2) Holdings 2 Limited 100% Ordinary Student accommodation

36


Entity Proportion Shares held

Class

Nature of Business

UPP (East Park) Holdings 1 Limited 100% Ordinary Student accommodation

UPP (East Park) Holdings 2 Limited 100% Ordinary Student accommodation

UPP (Swansea 2) Holdings 1 Limited 100% Ordinary Student accommodation

UPP (Swansea 2) Holdings 2 Limited 100% Ordinary Student accommodation

UPP Bond 1 Issuer plc 100% Ordinary Provision of senior secured bond funding

UPP Projects Limited 100% Ordinary Partnerships development for the provi-

sion of student accommodation

UPP Residential Services Limited 100% Ordinary Provision of facility management services

UPP (MidCo) Limited 100% Ordinary Holding company

21. Cash and cash equivalents29 February 2020 31 August 2018

£’000 £’000

Cash at bank and in hand 142,474 214,013

Short-term deposits 57,080 17,338

Cash and cash equivalents 199,554 231,351

The cash and cash equivalents disclosed above and in the statement of cash flows include £195,379k as at 29 February

2020 (£180,430k as at 31 August 2019) of restricted cash. This cash is subject to be used only by SPVs in line with the

service concession agreements and is therefore not available for general use by the other entities within the Group.

Investments (continued)

37


upp reit holdings limited · under the university partnerships programme. upp holdings limited is...

Documents